Glossary · Deal documents
Material adverse change
Also called MAC clause, material adverse effect, MAE
Definition
A material adverse change (MAC) clause lets the buyer pull out of a signed deal if an event seriously harms the target before closing. What counts as material is heavily negotiated, and courts set a high bar, so buyers rarely manage to rely on one.
Related terms
Share purchase agreement The contract by which a buyer acquires the shares of a company, with the price, warranties and conditions. Binding offer A buyer's final offer after due diligence, usually with a marked-up purchase agreement attached. Asset purchase agreement The contract for buying selected assets and liabilities of a business, instead of its shares. Change of control clause A contract term that lets the other party end or renegotiate the contract if the company is sold. Confidential information memorandum The detailed sales document a seller's adviser sends to buyers after they sign an NDA. Disclosure letter The seller's list of known exceptions to its warranties, which limits what the buyer can later claim for. Indemnity A promise to repay a specific loss in full, often used for known risks found in due diligence. Letter of intent A mostly non-binding document that sets out the main terms of a deal before the final contract is negotiated.